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8/6/2019 Larson12e Preface
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To the InstructorsFacilitators of
Student Success
As instructors, you and I know that the responsibility for student success lies ulti-
mately with the student. Our role is to create an environment that fosters learning:
we can present and demonstrate concepts in a variety of ways and then help stu-
dents apply those concepts to new situations; we can be there (face-to-face or
online) to respond to their questions with questions that help them find the
answer; and we can direct students to a variety of tools to enhance their success.
To help with our role, we need quality tools to facilitate student success both in
and out of the classroom. Fundamental Accounting Principles is still the core tool
to achieve that end, and the Twelfth Canadian Editionin response to instruc-
tor requestshas made three major changes that explicitly focus on students and
their success.
First, the Student Success CycleReadDoCheckApplyhas been
incorporated throughout the textbook. It is denoted by the symbol shown at left,
and reminds students that to achieve success, they must read the textbook, do the
exercises and problems to practise concepts, check their work (taking appropriate
remedial action), and apply knowledge to demonstrate learning in contrast tomemorization.
Second, the Student Success Cycle is linked to the new online Student
Success Centre at www.mcgrawhill.ca/studentsuccess/FAP, where a detailed
learning guide is provided to help students master introductory accounting con-
cepts. Student success at the post-secondary level is not measured by how much
knowledge a student has acquired but rather by how well a student can use or
applyknowledge . . . a concept also known as critical thinking! If students com-
partmentalize knowledge, they are challenged when they have to engage in the
activities of application, analysis, synthesis, or evaluationthe higher-level com-
petencies. We can help students develop higher-level skills by introducing them to
a model for critical thinking. Instructors typically give students formulas to per-
form calculations such as amortization and interest; why not provide them with a
formula for thinking as well?!
And that leads to the third innovation: on the inside cover of this textbook is
an outline of a basic model for teaching/learning critical thinking skills. To foster
the development of critical thinking proficiency, analysis-type questions have been
added to many exercises and problems in the Twelfth Canadian Edition. In addi-
tion, a new problem seriesCritical Thinking Mini Caseshas been introduced.
Education is a continuous journey and by giving students a model and tools
for both successful learning and critical thinking, the Twelfth Canadian Edition of
Fundamental Accounting Principles is, once again, the standard-setter in the study of
accounting. However, it is only because of the contributions of dedicated account-
ing instructors across Canada that this textbook is able to continually improve. I
am truly privileged to have had the opportunity to work with so many of you in
this regard; you have my sincerest appreciation. I would also like to thank andacknowledge Phil Paradis of NAIT, who planted the seed for a student success and
critical thinking focus.
Take care,
Tilly Jensen
xiv Preface
Student Success Cycle
Do the exercises
Applyyour critical
thinking skills
Read the material
Checkyour answers
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To the StudentsA Guide For Your Success
Your primary goal in this course should be to learn the basics about financial
accounting in order to understand and use financial statements and related infor-
mation effectively in decision making. These skills are essential, whether you are
going to be a business owner, a marketing specialist, or a financial planner, or
occupy some other business role.Student success means different things to many different people. For the pur-
pose of this accounting course, we will define a successful student as having two
qualities:
1. Active in the learning process, and
2. Able to apply critical thinking skills.
To learn anything, you must acquire knowledge. For example, I can learn about
playing golf by reading a book. But once I finish the book, will I be able to play
golf? It is very unlikely. I will need to practise. After a couple of hours spent swing-
ing a golf club at a driving range and realizing that my progress is limited, I might
do some more reading, get some instruction, watch a video, and keep on practis-
ing. I will continue to apply my growing knowledge of golf, and over time I will
begin to improve.To learn accounting, you would follow the same process. Begin by reading this
textbook. Will you understand accounting after simply reading? It is very unlikely.
You will need to practise the concepts by doing the exercises and problems. Then,
check your work. Are you on track? If not, do some more reading, get some instruc-
tion, use another tool to help you learn the material, but above all, be sure you
master the material and apply your knowledge before continuing to new concepts.
The process just describedread the material, do the exercises, check
your answers, and apply your critical thinking skillscan be summarized as:
ReadDoCheckApply, or the Student Success Cycle. You will see this
symbolthe circular icon shown at rightthroughout the textbook; it is a
reminder to check your progress and to go to the online Student Success Centre
at www.mcgrawhill.ca/studentsuccess/FAP for additional study tools.Once you have acquired knowledge in a specific area and mastered it through
practice, you are ready for the next step of the learning process: critical thinking.
Critical thinking involves the higher-level competencies of application, analysis,
synthesis, and evaluation. To make business decisions, you need to usethe knowl-
edge acquired in many subject areas (including accounting, economics, statistics,
and so on): critical thinking is the application of knowledge across topics and
across disciplines. The inside front cover provides a model to help you improve
your critical thinking skill development so that once you acquireknowledge, you
are able to applyit using analysis, synthesis, and/or evaluation.
This textbook was designed to help you learn efficiently and effectively. If you
follow the Student Success Cycle and use it in conjunction with other tools
available on the online Student Success Centre, you will be successful in learn-
ing accounting.
Good luck with your studies,
Tilly Jensen
Preface xv
Student Success Cycle
Do the exercises
Applyyour criticalthinking skills
Read the material
Checkyour answers
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Inside the Chapters
As educators, instructors strive to create an environment that fosters learning and
to provide students with the tools they need to succeed. The Eleventh Canadian
Edition upheld the high standards the market expects fromFundamental Accounting
Principles. With this Twelfth Canadian Edition we have introduced innovative
student-centred pedagogy and incorporated a higher-level competencycriticalthinking skillsthroughout the text.
All the pedagogical tools are carefully designed for ease of use and understand-
ing, helping the instructor teach and giving the students what they need to succeed.
New Student-Centred Pedagogy
Student Success Cycle
Student success at the post-secondary level is not measured by how much
knowledge a student has acquired, but rather by how well a student canuseknowledge. The Student Success Cycle, illustrated by a circular icon
(shown at left), reinforces decision-making skills by highlighting key stepstoward understanding and critically evaluating the information the student
has just read. Read, Do, Check, Applythis reinforces active learning(as opposed to passive learning). Displayed on each chapter-opening page
(as well as with Checkpoint questions, Demonstration Problems, and
end-of-chapter material), the Student Success Cycle is also linked to theStudent Success Centre (www.mcgrawhill.ca/studentsuccess/FAP) (See
page xxiv for more information).
Critical Thinking Challenge
An essential element of critical thinking is
the ability to ask questions while reading(or listening or speaking). These exercises are
designed to help students develop the skillsrelated to questioning. Suggested answers are
posted on the online Student Success Centre.
xvi Preface
Student Success Cycle
Do the exercisesApplyyour criticalthinking skills
Read the material
Checkyour answers
In the electronic entertainment world, BioWare has attracted a lot of attention.
BioWare Corp. is a Canadian company well-known throughout the world for its
development of market-leading role-playing games like Baldurs Gate, Neverwinter
Nights, Star Wars: Knights of the Old Republic, and Jade Empire.
BioWare has also attracted a lot of attention in the business world by recording
outstanding revenue growth in an industry plagued by unique challenges and
fierce competitionwith an increase in revenue of more than 988% since 1997.
That information comes from financial statements that report on the realities of
BioWares operations.
Joint CEOs Greg Zeschuk and Ray Muzyka learned in BioWares early years how
important it was to understand financial statements: banks and financial institu-
tions require strong balance sheets to justify providing capital for growth; income
statements provide a mechanism for tracking performance over time; and financial
projections of both income statements and balance sheets provide a blueprint for
future planning. Greg and Ray also use financial statements as a factor in assess-
ing potential business partners for development and publishing opportunities.
Obtaining additional business training enhanced Ray and Gregs appreciation for
the subtleties of accounting and financial projections critical to BioWares success.
C H A P T E R 2
CRITICAL THINKING CHALLENGE
If BioWare were obtaining a bank loan, what kind offinancial information might the
bank be interested in? If BioWare were successful in obtaining a loan from the bank,
should this transaction be shown on BioWaresfinancial statements or as part of the
owners personalfinancial statements?
Fiction Drives the Bottom Line!
Financial Statements andAccounting Transactions
Student Success Cycle
Do the exercisesApplyyour criticalthinking skills
Read the material
Checkyour answers
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Checkpoint
Previously called Flashback, this series of questions within the chapter reinforces the immediately
preceding material. These questions allow the student to Do problem material referencing
what they have just learned, and answers at the end of each chapter will then allow them toCheck their work. Additional Quick Study questions (available at the end of each chapter)
are identified for the student to Do, with answers available online to Check.
Analysis Component
An analysis component has been added to each mid- and end-of-chapter demonstration
problem, taking students beyond the numbers and promoting critical thinking. Several
exercises, problems, and Focus on Financial Statements questions also include an analysiscomponent to provide opportunities for students to practise these skills.
Retained Student-Centred Pedagogy
Real-World Focus
Like previous editions, the Twelfth Canadian Edition includes strong ties to the real world of
accounting, be it through detailed interviews with businesspeople for the chapter-opening
vignettes, examples of ethical standards and treatments, or annual reports for end-of-chapter
material. This integration with real-world companies helps engage students while they read.
Learning Objectives
Learning Objectives have long been a standard in the Larson textbook. By giving students a head
start on what the following material encompasses, the text readies them for the work ahead.
These Learning Objectives are fully integrated into the online Student Success Centre, allowingthe students to actively focus on one objective at a time.
Did You Know?
Social responsibility contin-ues to be important for
students to learn early in
their accounting courses.
Through the Did You
Know? feature, account-ings role in ethics and
social responsibility is
described by both report-
ing and assessing its
impact. Relating theory toa real-life situation piques
interest and reinforces
active learning.
Preface xvii
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1. What are the four major financial statements?
2. Describe revenues and expenses.
3. Explain assets, liabilities and equity.
4. What are three differences in financial statements for different forms of
organization?
Do: QS 2-1
CHECKPOINT
Do
Read
Check
Apply
Accounting Information at Work
The Multiple Sclerosis (MS) Society of Canada provides assistance and support to
individuals with MS, in addition to funding research aimed at finding a cure.
Accounting makes it possible for not-for-profit organizations like the MS Society of
Canada to present to external users information like the following:
SOURCE: www.mssociety.ca. Information accessed June 1, 2006.
DID YOU KNOW?
How funds are raised How funds are spent
36% Client Services
29% Research & Clinics
13% Administration
8% Public Education
5% ChapterDevelopment
5% Fundraising
4% GovernmentRelations
84% Donations &
Special Events8% Grants
4% United Way
4% Investment
Income &
Membership
36%
4%4%5%4%
q
q
q
q
q
q
q
q
q
q
q
29%
13%
8%
8%
5%
84%
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xviii Preface
Judgement Call
This feature requires students to make accounting and business decisions by using role-playing
to show the interaction of judgement, awareness, and the impact of decisions made. Guidance
answers are available at the end of each chapter.
Extend Your Knowledge
Supplementary material has been developed to explore some topics in more detail than the
textbook can allow. When available, the Student Success Centre icon is displayed in the
margin, alerting students to visit www.mcgrawhill.ca/studentsuccess/FAP if they choose todelve deeper into the material.
Annual Reports
Features and assignments that highlight companies such as WestJet (a company that provides
services) and Danier (a merchandiser) show accounting in a modern and global context. By
having students go directly to thefinancial statements of real companies, they remain engagedin the active learning process. Portions of these annual reports are reproduced at the end of
both Volumes 1 and 2.
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Cost PrincipleAll transactions are recorded based on the actual cash amount received or paid. In
the absence of cash, the cash equivalent amount of the exchange is recorded.5
Example: If Finlay Interiors purchased used furniture for $5,000 cash, it is
recorded in the accounting records at $5,000. It makes no difference if Carol
Finlay thinks that the value of the furniture is $7,000.
Extend Your Knowledge
2-4
SSC
Entrepreneur
You and a friend have developed a new design for mountain bikes that improvesspeed and performance by a remarkable 25% to 40%. You are planning to form a
small business to manufacture and market these bikes. You and your friend are con-
cerned about potential lawsuits from individuals who may become injured because
of using the speed feature of the bikes with reckless abandon. What form of organ-
ization do you set up?
JUDGEMENT CALL
Answerp. 17
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Preface xix
End-of-Chapter Material
Fundamental Accounting Principles sets the standard for quantity and quality of end-
of-chapter material.
Summary
Each chapter includes asummary of the chapterby Learning Objective, to
reinforce what students
have just learned.
Guidance Answers
to Judgement CallThese discuss theJudgement Call boxes
presented earlier in the
chapter, and reinforce the
need for decision making
and critical thinking skills.This featurefits into the
Student Success Cycle
by reinforcing the
Apply step.
Guidance Answersto Checkpoint
The Checkpoint material
throughout the chapter
allows students to pause
and check their progress.This feature reinforces
the Do,Check, and
Apply steps of the
Student Succes Cycle.
Glossary
All terms highlighted in
the chapter and their pagereferences are included.
LO1 Identify and explain the content and reporting
aims of financial statements. The majorfinancial
statements are: income statement (shows a companys
profitability determined as revenues less expenses equals
net income or loss), statement of owners equity (explains
how owners equity changes from the beginning to the
end of a period), balance sheet (reports on a companys
financial position, including assets, liabilities, and owners
equity), and cashflow statement (identifying all cash
inflows and outflows for the period). The differences in
financial statements across forms of business organization
are: 1. The name of the equity section of the balance sheet:
owners equity for a sole proprietorship, partners equity for
a partnership, and shareholders equity for a corporation;
2. Distributions of assets to the owner(s) are called
continues to operate. The monetary unit principle assumes
that transactions can be captured in money terms and
that the monetary unit is stable over time. The revenue
recognition principle means that revenue is recognized
when earned, assets received from selling products and
services do not have to be in cash, and revenue recognized
is measured by cash received plus the cash equivalent
(market) value of other assets received.
LO3 Explain and interpret the accounting equation.
Investing activities are funded by an organizations
financing activities. An organizations assets (investments)
must equal itsfinancing (from liabilities and from equity).
This basic relation gives us the accounting equation:
Assets Liabilities Owners Equity.
Summary
Supplier
We can use the balance sheet, or accounting equation, to
help us identify risky customers to whom we would not
want to extend credit. The accounting equation can be
written as: Assets Liabilities Owners Equity. A bal-
ance sheet provides us with amounts for each of these
key components. The lower the owners equity, the less
likely you should be to extend credit. A low owners
equity means that there is little value in the business on
which other creditors do not already have claims. Note
that any decision to grant credit would normally include
an examination of the complete financial statements.
g u i d a n c e a n s w e r t o JUDGEMENT CALL
g u i d a n c e a n s w e r s t o CHECKPOINT
1. The four major financial statements are: income
statement, statement of owners equity, balance
sheet, and cash flow statement.
2. Revenues are the value of assets received in exchange
for products or services provided to customers as
part of a businesss main operations. Expenses are
costs incurred or the using up of assets that result
from providing products or services to customers.
Expenses also can arise from increases in liabilities.
case, the business has received the cash from the
customer without providing the product. Therefore,
the business has not realized a revenue but instead
has incurred a liability; it owes the customer the
product.
8. A transaction that involves changing the form of
one asset for another asset would notaffect any lia-
bility and equity accounts. (2) offers an example.
DoRead
Check
Apply
Accounting equation A description of the relationshipbetween a companys assets, liabilities, and equity; expressed
as Assets Liabilities Owners Equity; also called the bal-
ance sheet equation. (p. 33)
Account payable A liability created by buying goods or
services on credit. (p. 29)
Account receivable An asset created by selling products or
services on credit. (p. 29)
Assets Properties or economic resources owned by the busi-
ness; more precisely, resources with an ability to provide
future benefits to the business. (p. 29)
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Economic consideration Something of value (e.g., prod-ucts, services, money, and rights to collect money). (p. 34)
Equity The owners claim on the assets of a business; more
precisely, the assets of an entity that remain after deducting
its liabilities; also called net assets. (p. 30)
Expenses Costs incurred or the using up of assets as a result
of the major or central operations of a business. (p. 27)
Event See business events. (p. 34)
Financial statements The most important products of
accounting; include the income statement, statement of
owners equity, balance sheet, and cash flow statement.
Glossary
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xx Preface
Problem Material
DemonstrationProblems
These problems reinforce
the chapter material
and further bolster theStudent Success Cycle.
Questions
These short-answerquestions reinforce the
chapter content byLearning Objective.
Quick Study
These single-topic exer-
cises give the students a
quick test of each key
element in the chapter
and are referenced toLearning Objectives.
Answers to these items
are available on the
online Student
Success Centre.
Exercises
Exercises provide stu-dents with an additional
opportunity to reinforce
basic chapter concepts
by Learning Objective.
Problems
Problems typically
incorporate two or more
concepts. As well, thereare two groups of prob-
lems: A problems and
Alternate or B problems.
B problems mirror the A
problems to help improveunderstanding through
repetition.
demonstration problem
DoRead
Check
Apply
Rupert Jones works in a public accounting firm. The management of ShadowTech
Company invites Jones to prepare a bid to review ShadowTechs financial state-
ments. In discussing the reviews fee, ShadowTechs management suggests a fee
range where the fee amount depends on the reported profit of ShadowTech. The
higher its profit, the higher the review fee paid to Joness firm.
Required
1. Identify the parties potentially affected by this situation.
2. What are the ethical factors in this situation?
3. Would you recommend that Jones accept this review fee arrangement? Why?
4. Describe some of the factors guiding your recommendation.
1. What tasks are performed with the work sheet?
2. Why are the debit and credit entries in the Adjustmentscolumns of the work sheet identified with letters?
3. What two purposes are accomplished by recording
closing entries?
i i
10. What is a companys operating cycle?
11. How is an unearned revenue classified on the balancesheet?
12. What classes of assets and liabilities are shown on a
typical classified balance sheet?
i i
Questions
Quick Study
In preparing a work sheet, indicate thefinancial statement debit column to which a normal bal-
ance of each of the following accounts should be extended. Use ISfor the Income StatementDebit column and BSfor the Balance Sheet or Statement of Owners Equity Debit column.
1. Equipment 4. Prepaid insurance
2. Owner, withdrawals 5. Accounts receivable3. Insurance expense 6. Amortization expense, equipment
QS 5-1Applying a work sheet
LO1
Exercise 5-1Extending adjusted accountbalances on a work sheet
LO1
These accounts are from the Adjusted Trial Balance columns in a companys 10-column worksheet. In the blank space beside each account, write the letter of the appropriate financial state-
ment column to which a normal account balance should be extended.
a. Debit column for the income statement.b. Credit column for the income statement.
c. Debit column for the balance sheet and statement of owners equity.d. Credit column for the balance sheet and statement of owners equity.
1. Roberta Jefferson, withdrawals 9. Cash2. Interest earned 10. Office supplies
3. Accumulated amortization, machinery 11. Roberta Jefferson, capital
Exercises
Problem 7-1AAlternative cost flowsperpetual
LO2
The Stilton Company has the following inventory and credit purchases during the fiscal yearended December 31, 2011.
Problems
Beginning.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 500 units @ $90/unit
Feb. 10. .. ... .. .. .. .. .. .. ... .. .. .. .. .. .. . 250 units @ $84/unit
Aug. 21... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 130 units @ $100/unit
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Preface xxi
Ethics Challenge
Each chapter includes at
least one Ethics Challenge
to reinforce critical thinkingskills for the students and
open up discussion about
various ethical topics.
Focus on FinancialStatements
Each chapter includes a
technical and analyticalquestion that incorporates
into thefinancial state-
ments all major topics
covered up to that
point. New to the TwelfthCanadian Edition are addi-
tional Focus on Financial
Statements questions,
available online at the
Student Success Centre.
Critical ThinkingMini Cases
New to the TwelfthCanadian Edition, the
Mini Cases give students
the opportunity to apply
critical thinking skills to
concepts learned in thechapter, thus further rein-
forcing the Apply step of
the Student Success Cycle.
EC 3-1You are a cashier at a retail convenience store. When you were hired, the owner explained to youthe policy of immediately ringing up each sale. Recently, lunch hour traffic has increased dramat-ically and the manager asks you to take customers cash and make change without ringing up
sales to avoid delays. The manager says she will add up cash and ring up sales equal to the cash
amount after lunch. She says that in this way the register will always be accurate when the ownerarrives at 3:00 p.m.
Required
1. Identify the advantages and disadvantages of the managers suggestion.
2. Identify the ethical dilemma and evaluate at least two courses of action you might considerand why.
Ethics Challenge
FFS 3-1Travis McAllister operates a surveying company. For thefirst few months of the companys life(through April), the accounting records were maintained by an outside bookkeeping service.
According to those records, McAllisters owners equity balance was $75,000 as of April 30. To
save on expenses, McAllister decided to keep the records himself. He managed to record May stransactions properly, but was a bit rusty when the time came to prepare thefinancial statements.
Hisfirst versions of the balance sheet and income statement follow. McAllister is bothered that the
company apparently operated at a loss during the month, even though he was very busy.
Focus on Financial Statements
You have worked with XYZ Contractors as the marketing manager for a number of years. Each of
your salespeople must submit a monthly report detailing money they spent while conducting
business on behalf of XYZ Contractors. Each item on the monthly report must be coded as to theeffect on assets, liabilities, and equity. As marketing manager, one of your duties is to review the
monthly reports. One salespersons report for September shows the following:
RequiredUsing the elements of critical thinking described on the inside front cover, respond.
Critical Thinking Mini Case
Description of Amount of Effect on Effect on Effect onDate Transaction Transaction Assets Liabilities Equity
Aug. 28 Sold 80 units of product $150,000 Increased Cash No effect Increased Revenuesto a customer for cash
Sept. 10 Purchased new desk for $1,500 No effect Increased Accounts Increased Of fice
office to be paid in Payable ExpenseOctober
Sept. 230 Took clients for lunch $680 Decreased Cash Increased Owner and paid cash Investments
Oct. 5 Paid for September $130 Decreased Cash Increased Expensescell phone usage
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xxii Preface
The Accounting Standard
We listened! In addition to obtaining individual reviewer comments, we held focus groups in cities through-
out Canada to hear the issues and concerns instructors like you have about the materials you use to teach
introductory financial accounting. We were the first textbook to go to these lengths for market research, and
we do more every year. We think youll like what you see.
Throughout the Text
Preface
Added the Critical Thinking Model and the Student
Success Cycle to the Preface
Chapter
Edited and updated the chapters in general
Added Critical Thinking Challenge questions, a new
feature following the opening vignette, to help students
learn to ask/answer questions while reading, speaking,
or listening Renamed the Flashback feature as Checkpoint to
correspond to the Student Success Cycle emphasis and
critical thinking initiative
Added an Analysis Component to the Demonstration
Problem and Mid-Chapter Demonstration Problem
End-of-Chapter
Linked the Quick Study questions to the Checkpoints
within the body of the chapter, and provided solutions
online to encourage students to Do and Check while
they Read
Added a new Critical Thinking Mini Case to each
chapter Deleted the Leons annual report from the end of the
textbook and replaced it with that of Danier Leather, a
different merchandiser
Added an index of the Extend Your Knowledge items to
the back of the textbook
Chapter 1
Changed the opening vignette
Removed the former Learning Objective 5, Describe
how technology is changing accounting, per reviewer
feedback
Moved Appendix 1A, Codes of Ethics and Professional
Conduct, to the online Student Success Cycle as Extend
Your Knowledge 1-3
Converted the former Exhibit 1.4 (pictures) to a table
Added a paragraph and Extend Your Knowledge 1-2 on
corporate governance
Adjusted the glossary
Added new Quick Study questions/Exercises
Chapter 2
Moved Appendix 2A, Developing Accounting
Standards, to the online Student Success Cycle as
Extend Your Knowledge 2-3
Added Extend Your Knowledge 2-4 on GAAP
Adjusted the glossary
Added new Quick Study questions/Exercises
Added Analysis Components throughout
Exercises/Problems
Chapter 3
Added a new Extend Your Knowledge item regarding
how banks account for cash
Added new Quick Study questions/Exercises
Added Analysis Components to several
Exercises/Problems
Chapter 4
Changed the opening vignette
Added two new Extend Your Knowledge items
Broke up the material on Learning Objective 4 per
reviewer requestinserted Checkpoints to give the
students a pause between types of adjustments Added new Quick Study questions/Exercises
Chapter 5
Added Extend Your Knowledge 5-5, regarding Current
vs. Long-Term Liabilities
Added new Quick Study questions/Exercises
Added Analysis Components to several Exercises/Problems
Chapter 6
Combined Learning Objectives 1, 2, and 3 into Learning
Objective 1; combined former Learning Objectives 6 and
7 into Learning Objective 3
Added new Quick Study questions/Exercises
Added Analysis Components to several
Exercises/Problems
Added new Extend Your Knowledge 6-1 and Analytical
and Review Problems 6-2 and 6-3Comprehensive to the
online Student Success Cycle
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Preface xxiii
Chapter 7
Combined former Learning Objectives 1 and 2 into
Learning Objective 1
Adjusted Exhibits 7.13 and 7.14 to reflect a perpetual
inventory system
Added Learning Objective 8 regarding inventory errors
for a periodic inventory system Added new Quick Study questions/Exercises
Deleted the former Extend Your Knowledge 7.1 and 7.2
as dated material
Chapter 8
Changed the opening vignette
Combined Learning Objectives 1, 2, and 3 into
Learning Objective 1
Added new Quick Study questions
Rearranged many of the end-of-chapter Exercises and
Problems so that the periodic inventory questions
follow the perpetual inventory questions they refer
to on same page Added a new Extend Your Knowledge item regarding
special journals for a periodic inventory system
Chapter 9
Added new Quick Study questions/Exercises
Moved Focus on Financial Statements 9-2 from online
to the textbook
Added Analysis Components throughout
Exercises/Problems
Made some interesting changes to some Problems basedon reviewer suggestions
Improved Exhibits 9.5 to 9.9
Added some footnotes based on reviewer requests
Chapter 10
Added new Quick Study questions/Exercises
Moved Focus on Financial Statements 10-2 from online
to the textbook
Added Analysis Components throughout
Exercises/Problems
Combined former Learning Objectives 5 and 6 into
Learning Objective 5
Chapter 11
Performed some editing and updating
Added new Critical Thinking Mini-Case
Moved former Exhibits 11.1 and 11.2 to EYK
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T
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O
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Y Technology Solutions to Help You Succeed
Fundamental Accounting Principles offers a wealth of resources unmatched in educa-
tional publishing
Student Success Centre www.mcgrawhill.ca/studentsuccess/FAPReinforcing its commitment to student success, the Larson/Jensen Online Learning
Centre has been completely redesigned and redeveloped with the student in mind.
Complementing the pedagogy of the text, the Student Success Cycle is now
fully integrated into this online resource. Students can review each learning objec-
tive and following the steps of the Student Success Cycle, work through self-study
quizzes and critical thinking exercises for each learning outcome. Or, they can start
at the chapter level and if challenged by a particular concept while completing the
quizzes, focus into this specific learning objective using the Student Success Cycle
as a guide.
The Centre continues to offer self-study quizzes, a searchable glossary, crossword
puzzles to practice key terms for each chapter, Excel Templates for select problems
in the text, and additional resources including Extend Your Knowledge modules
and video segments.
Studying on the GoStudents can study on the go with McGraw-Hills course content for the Apple iPod.
Our innovative approach allows students to download audio and video pre-
sentations directly into their iPod and take learning materials with them wherever
they go. Whether its in the car, on the train, or waiting between classesits easyto get a quick refresher on key course content and makes review and study time as
easy as putting in headphones!
Visit the Student Success Centre to download these resources.
SSC
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Online Assessment
Lyryx Interactive Financial Accounting (LIFA) is a Web-based assessment tool that
has captured the attention of post-secondary schools across the country. By reflect-
ing the classroom environment, LIFA significantly benefits both instructors and
students.
Each chapter is broken down into several Lessons; condensed versions of thematerial in the text.
Each Lesson is supported by a self-correcting Exploration that allows the
students to practise the Lessons concept. Because these Explorations are algorith-
mically generated, the students can try them as often as they want and get a differ-
ent question each time.
Once the students master the Exploration, the instructor can set up a home-
work assignment, or Lab. These Labs are algorithmically generated and automati-
cally graded, so students get instant feedback. Grades are instantly recorded into a
Gradebook that the students and the instructor can view. Less of the instructors
time is spent on marking, andstudents get built-in feedback!
LIFA motivates students in two ways: (1) it is tied to assessment, and (2) Labs
can be tried as many times as the students wish, with only the best grade being
recorded. Instructors know that if students are doing their accounting homework,
they will enjoy success. Recent research has shown that when Labs are tied to
assessment, even if they are worth only a small percentage of the total grade for the
course, students WILL do their homeworkand more than once!
T
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Supplements for the Students
iStudyAvailable 24/7: providing instant feedback when you want, how you want, and
where you want. This online iStudy space was developed to help you master con-
cepts and achieve better grades with all the learning tools youve come to expect,including chapter summaries, quiz questions and additional problems. iStudy also
offers new Show Me, Guide Me tutorial problems, numerous animations, and
even an interactive, fun game called TetrAccounting. iStudy offers the best, most
convenient way to interact, learn, and succeed.
iStudy can be purchased through the online Student Success Centre or by pur-
chasing a PIN code card through the campus bookstore. Instructors: Please contact
your iLearning Sales Specialist for more information on how to make iStudy part of
your students success.
Working PapersAvailable for purchase by students, Working Papers for Volumes 1 and 2 match the
end-of-chapter assignment material. They include papers that can be used to solveall of the Quick Study questions, Exercises, and Problems. Each chapter also con-tains papers for both the A and B problem sets.
Excel TemplatesSelected end-of-chapter exercises and problems, marked in the text with an icon,can be solved using these Excel templates, located on the Student Success Centre.
Excel Exercise 2-12
Given Data:
a. Cash invested by owner $ 2,500
b. Office supplies purchased on credit $ 200
c. Cash received for work done for a client $ 600d. Government grant applied for $ 10,000
e. Salary paid to assistant $ 1,500
f . Work completed for a customer on credit $ 1,250
Answer:
= Liabilities
Cash +
Accounts
Receivable + Office Supplies = Accounts Payable
a. $ -0- $ -0- $ -0- $ -0-
b. -0- -0- -0- -0-
Bal.
c. -0- -0- -0- -0-
Bal.
d. -0- -0- -0- -0-
Bal.
e. -0- -0- -0- -0-
Bal.
f . -0- -0- -0- -0-
Bal. + + =
Assets
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Supplements for the Instructor
Instructors CD-ROM (ICD)This CD-ROM contains materials for managing an active learning environment
all in one place!
Solutions Manual
Fundamental Accounting Principles continues to set the standard for accuracy of its
problem material. The Solutions Manual has been technically checked for accuracy
by six different instructors during its development. The Solutions Manual, avail-
able in both Microsoft Word and PDF format on the ICD, includes solutions for all
end-of-chapter material.
Instructors Manual
The Instructors Manual cross-references assignment materials by Learning Objective
and also provides a convenient chapter outline.
Computerized Test BankThe test bank has been extensively revised and technically checked for accuracy
both to reflect the changes in the Twelfth Canadian Edition and to improve the
quality. Grouped according to Learning Objective and difficulty level, the ques-
tions in the computerized test bank include true/false, multiple choice, matching,
short essay, and problem material. (Note: the Test Bank is available in Rich Text
Format on the ICD for ease of printing.)
PowerPoint Presentations
These presentation slides have been extensively redesigned for this edition and are
fully integrated with the text in effort to better illustrate chapter concepts.
Image Bank
All exhibits and tables displayed in the text are available for your use, whether
for creating transparencies or handouts, or customizing your own PowerPoint
presentations.
Excel Template Solutions
Solutions to the problems using Excel templates are available.
Online Learning CentreInstructors Area
Instructor Centre
Instructors can access downloadable supplements including the Instructors
Manual, Solutions Manual, Microsoft
Powerpoint slides, Image Bank, andMicrosoft Excel template solutions. SSC
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Support for the Instructor
Superior ServiceService takes on a whole new meaning with McGraw-Hill Ryerson. More than just
bringing you the textbook, we have consistently raised the bar in terms of innova-
tion and educational research. These investments in learning and the educationcommunity have helped us understand the needs of students and educators across
the country, thus allowing us to foster the growth of truly innovative, integrated
learning solutions.
Integrated Learning Sales SpecialistYour Integrated Learning Sales Specialist is a McGraw-Hill Ryerson representative
who has the experience, product knowledge, training, and support to help you assess
and integrate all of the Fundamental Accounting Principles supplements, technology,
assessment, course management, and services into your course for optimum teach-
ing and learning performance. Whether it is using our test bank software, helping
your students improve their grades, or putting your entire course online, your
iLearning Sales Specialist is there to help you do it. Contact your local iLearning SalesSpecialist today to learn how to maximize all of McGraw-Hill Ryersons resources.
Course ManagementPageOut is the McGraw-Hill Ryerson Web site development software, which is
available free of charge to all adopters. This tool is designed to help faculty create
an online course, complete with assignments, quizzes, Web links and moreall in
just a few minutes. Visit www.mhhe.com/pageout for more information.
In addition, content cartridges are available for both WebCT and Blackboard
course management systems. These platforms provide instructors with user-
friendly, flexible teaching tools. Contact your local McGraw-Hill Ryerson iLearning
Sales Specialist for details.
iLearning Services ProgramMcGraw-Hill Ryerson offers a unique iServices package designed for Canadian fac-
ulty. Our mission is to equip providers of higher education with superior tools and
resources required for excellence in teaching. For additional information, visit
www.mcgrawhill.ca/highereducation/iservices.
Teaching, Technology, and Learning Conference SeriesThe educational environment has changed tremendously in recent years, and
McGraw-Hill Ryerson continues to be committed to helping you acquire the skills
you need to succeed in this new milieu. Our innovative Teaching, Technology, and
Learning Conference Series brings faculty together from across Canada with 3MTeaching Excellence award winners to share teaching and learning best practices in
a collaborative and stimulating environment. Preconference workshops on general
topics, such as teaching large classes and technology integration, are also offered.
We will also work with you at your own institution to customize workshops that
best suit the needs of your schools faculty.
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Developing a Market-Driven Text
The success of this text is the result of an exhaustive process, which has gone beyond the scope of a single edition.
Hundreds of instructors and educators across the country have been involved in giving their feedback to help develop
the most successful accounting fundamentals text in the country. We owe thanks to all of those who took the time to
evaluate this textbook and its supplemental products.
Twelfth Canadian Edition reviewersGlenn Arnold Northern Alberta Institute of
Technology
Jerry Aubin Algonquin College
Les Barnhouse Athabasca University
Warren Beck St. Clair College
Maria Belanger Algonquin College
Mark Binder Red River College
Dave Bopara CDI College
David Burrell Okanagan University College
Robert A. Coke Durham CollegeRobert Despatie York UniversityGlendon College
Randy Dickson Red Deer College
Denise Dodson Nova Scotia Community College
Carolyn Doni Cambrian College
George Fisher Simon Fraser/UBC/CGA
David Fleming George Brown College
Amanda Flint Trinity Western University
Jeremy Frape Humber College
Donna Grace Sheridan Institute of Technology
and Advanced Learning
Diana Grant Nova Scotia Community College
Elizabeth Hicks Douglas College
John Holliday Northern Alberta Institute of
Technology
Paul Hurley Durham College
Gerri Joosse Lethbridge College
Nadine Lancaster British Columbia Institute of
Technology
Doug Leatherdale Georgian College
Cynthia Lone Red River College
Bonnie Martel Niagara College
Debbie Musil Kwantlen University College
Penny Parker Fanshawe College
George Pelzer Northern Alberta Institute of
Technology
Guy Penney College of the North Atlantic
Joe Pidutti Durham College
Traven Reed Canadore CollegeLou Richards Southern Alberta Institute of
Technology
Doug Ringrose Grant MacEwan College
David Sale Kwantlen University College
Gabriela Schneider Northern Alberta Institute of
Technology
Donald R. Smith Georgian College
Helen Stavaris Dawson College
Nancy Tait Sir Sandford Fleming College
Denise Terry SIASTPalliser Campus
Ron Thornbury Seneca College
Rod Tilley Mount St. Vincent University
John Varga George Brown College
Jeannine Wall Red River College
Richard Wright Fanshawe College
Patricia Zima Mohawk College
Eleventh Edition reviewersCecile Ashman Algonquin CollegeLes Barnhouse Athabasca UniversityKeith Barrett Humber CollegeMaria Belanger Algonquin CollegeGary Biggs Grant MacEwan CollegeMark Binder Red River CollegeDave Bopara Toronto School of BusinessRick Boyack Southern Alberta Institute of
TechnologyWalt Burton Okanagan University CollegeCheryl Christoff Toronto School of BusinessAlice Cleveland Nova Scotia Community CollegeLouise Connors Nova Scotia Community CollegeJoan Conrod Dalhousie University
Suzanne Coombs Kwantlen University CollegeWilliam Cormier St Francis Xavier UniversityJohn Currie Humber CollegeJohn Daye New Brunswick Community
CollegeRandy Dickson Red Deer Community CollegeChaman Doma Centennial CollegeCarolyn Doni Cambrian CollegeDave Eliason Southern Alberta Institute of
TechnologySheila Elworthy Camosun CollegeAlbert Ferris University of Prince Edward IslandDavid Fleming George Brown CollegeAmanda Flint Trinity Western University
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Jeremy Frape Humber CollegeHenry Funk Red River CollegeJack Halliday Northern Alberta Institute of
TechnologyErn Harley Sheridan Institute of Technology
and Advanced LearningElizabeth Hicks Douglas College
Michael Hockenstein Vanier CollegeSue Hogan Capilano CollegePat Humphreys Medicine Hat CollegeStephanie Ibach Northern Alberta Institute of
TechnologyConnie Johl Douglas CollegeGeraldine Joosse Lethbridge Community CollegeBarbara Jordan Cambrian CollegeJane Kaake-Nemeth Durham CollegeDave Kennedy Lethbridge Community CollegeVal Kinnear Mount Royal CollegeLaurette Korman Kwantlen University CollegeRafik Kurji Mount Royal CollegeDouglas Leatherdale Georgian CollegeMichael Lee Humber CollegeCynthia Lone Red River CollegeMarie Madill-Payne George Brown CollegeMichael Malkoun St. Clair CollegePatricia Margeson New Brunswick Community
College
Bonnie Martel Niagara CollegeDani Moss Durham CollegeJan Nyholdt Southern Alberta Institute of
TechnologyPenny Parker Fanshawe CollegeClifton Philpott Kwantlen University CollegeJoe Pidutti Durham College
Sharon Ramstad Grant MacEwan CollegeTraven Reed Canadore CollegeClara Reid Lethbridge Community CollegeDoug Ringrose Grant MacEwan CollegeDavid Sale Kwantlen University CollegeGiuseppina Salvaggio Dawson CollegeMichael Sirtonski Assiniboine CollegeMelbourne Sparks Lambton CollegeGreg Streich DeVry Institute of Technology
(Calgary)Selina Tang Douglas CollegeMarie Templeton Southern Alberta Institute of
TechnologyJohn Varga George Brown CollegeJohn Vermeer Humber CollegeJeannine Wall Red River CollegeBrenda Warner Conestoga CollegeDennis Wilson Centennial CollegeRichard Wright Fanshawe CollegeBrian Zwicker Grant MacEwan College